When it comes to raw materials, especially for fossil fuels, it’s essential to evaluate existing and potential production capabilities for such companies. Using the EV/2P Ratio is a powerful tool when evaluating fossil fuel-related companies. Defining the Ratio This ratio is calculated by dividing a business’ enterprise value into the company’s reserves. It provides financial […]

While Cash EBITDA isn’t recognized by generally accepted accounting principles (GAAP), it’s a way for company owners and investors to account for deferred revenue during valuation modeling. This financial metric measures a business’ year-over-year change in postponed revenue to analyze a company’s financial situation. Defining EBITDA Before Cash EBITDA is defined, EBITDA must be defined. […]

With 57 percent of public companies offering their workers employee stock purchase plans (ESPPs), according to the National Association of Stock Plan Professionals (NASPP), understanding how qualifying dispositions work is an essential skill. The concept refers to someone selling or otherwise “disposing” of equities who sees advantageous tax benefits. This is especially pronounced when a […]

Whether you are an investor, an owner, or an internal financial analyst, understanding how the equity multiplier works and how to interpret it is a helpful skill. Defining the Equity Multiplier The equity multiplier is a metric that tells the user what percentage of the company’s assets are loaned against shareholders’ equity. The smaller the […]

An activity cost driver is anything that causes a company’s variable costs to either reduce or grow. Since measuring an activity cost driver is a way to streamline the administration of managing production costs, it’s an integral part of activity-based costing. Examples of activity-cost drivers are warehouse expenses, modifying engineering designs, and retooling, setup, and […]

Whether it’s an individual investor or a business owner looking to increase their earning power, understanding how accretion works is essential for individual and business investors to make the correct decisions going forward. How Accretion Works for Bonds Accretion is the gradual increase of a bond’s value over time. As a bond moves toward its […]

When it comes to evaluating a business, there are many ways to perform a valuation. One way to do so is to use the Q Ratio. Known as Tobin’s Q Ratio or simply the Q Ratio, this method looks at the proportion between the values of a physical asset and its replacement cost. Developed by […]

Contribution margin after marketing (CMAM) measures how much money is generated per unit retailed after factoring in a company’s variable costs, along with marketing costs. It’s analogous with contribution margin, however, a business must factor in marketing costs the company experiences when publicizing a good to likely consumers with details on the business’ wares. This […]

According to the Federal Reserve Bank of St. Louis, collection agencies saw $16.28 billion in revenue in 2019. While revenues have declined somewhat in recent years, unpaid invoices are still big business. Accounts receivable aging reports can help companies identify and mitigate unpaid invoices and potentially lower a business’ need to send unpaid invoices to […]

When it comes to businesses and asset depreciation, there are many types available, such as straight-line, units of production, double declining balance, and sum of years digits. While these aren’t the only ones, they are available via the IRS code and help businesses reduce their taxable income. However, under certain circumstances, businesses have to be […]